US Supreme Court to hear arguments on states collecting sales tax from on-line retailers

The US Supreme Court will hear a case tomorrow (Tuesday, 4-17-18) that could force Internet retailers to start collecting state sales taxes.

The case comes from South Dakota. It attempts to reverse the decision in the earlier “Quill” case from North Dakota. “Quill” sold office supplies through catalogs. The high court would not allow North Dakota and other states to require the collection of sales taxes from retailers that don’t have a physical presence in that state. The justices ruled that it would be extremely difficult to collect sales taxes in different states.

"The arguments made back in the early '90s are really null and void now," said North Dakota Tax Commissioner Ryan Rauschenberger. "We believe that technology has improved, and taken away the burden on the on-line retailers, and that they should be collecting and remitting."

Rauschenberger said there are now “certified service providers” who can collect and remit taxes.

"So the burden doesn't exist any more," Rauschenberger said.

The North Dakota Legislature in 2017 passed laws to begin the collections if and when “Quill” was overturned.

"When any person in North Dakota actually buys a product on-line, they still owe the tax," Rauschenberger said. "They have to remit it individually, on a 'use tax' form. But that's very infrequent. It's a voluntary basis, essentially."

Rauschenberger said there are some on-line retailers who do remit sales taxes – but the vast majority do not.

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A House committee is looking at a bill that could lead to North Dakota collecting sales tax from on-line retailers.

The bill could set up a court case to overturn the Supreme Court’s ruling in “Quill v. North Dakota.” In that case, the Court rejected the idea of states collecting sales tax from Internet retailers. Sen. Dwight Cook (R-Mandan) is the sponsor. He said one of two things would have to happen to allow that tax collection.